Turkish Lira at new record low on inflation, security concerns

The Turkish lira hit a fresh record low on Jan. 3, pummeled by higher-than-expected inflation and security worries, though strong Chinese factory activity data boosted broader emerging equities to near three-week highs. The lira traded almost at 3.6 per dollar, down 1.4 percent, after sharp rises in food and drink prices pushed Turkish inflation to 1.64 percent in December for an annualized 8.53 percent. That further soured sentiment towards Turkish assets, already battered by a series of terror attacks in recent months, including a New Year’s Day mass shooting. Worries about a slowdown in the economy and plans for an executive presidency have also undermined confidence. The security situation also makes it unlikely that tourism, a key part of the economy, will recover in 2017. “The inflation number is worse than expected ... it’s an awful number and obviously there is a lag of months before the full effect of lira depreciation ... is reflected, so one would expect core inflation to remain high from here,” said Paul Fage, an emerging market strategist at TD Securities. Other emerging markets were broadly supported by robust manufacturing data and a rally in oil prices, with the benchmark emerging stocks index up 0.2 percent, though the dollar’s 1 percent rise capped gains.